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Chris Gash for Money

Annie Baker was halfway through her junior year at Green Mountain College when she found out it would be her last semester. Away at a partner college for the semester, she learned her liberal arts college in Vermont would be closing four months later via texts from her friends still on campus.

"We were seven hours away without our community when we found out,” she said.

Baker says that there had been rumors floating around campus since her first year that the college might close, but no one had seemed to take it seriously.

“We were aware that Green Mountain wasn’t doing the best financially,” she says, “but we just thought it was a joke that we’d actually close.”

Green Mountain’s closure came more than a year before the coronavirus hit in March, forcing many colleges to shutter their physical campuses and pivot to online learning. Those short-term campus shutdowns have been costly for all institutions. But the longer-term economic fallout from the coronavirus could lead to more scenarios like Green Mountain’s — pushing some colleges that were already on a financial precipice over the edge.

Since 2015, more than 50 public and nonprofit institutions have closed or merged, according to an analysis by Education Dive. At least eight colleges and universities have announced permanent shutdowns or mergers since March. Colleges are dealing with multi-million dollar price tags to upgrade campus technology, plus enrollment declines, reduced earnings from endowments and massive state budget cuts.

Baker says she was able to transfer all of her credits and financial aid to Prescott College in Arizona, where she’ll earn her bachelor’s in environmental studies in December. Many students don’t have as smooth a transition after a college closes down, losing both credits and money if transfer institutions won’t accept all of their previous coursework. Depending on how far a student is along in their education, closures may also extend the time it takes to earn a degree if they have to repeat courses.

Susan Baldridge is a psychology professor and provost at Middlebury College and co-author of The College Stress Test: Tracking Institutional Futures Across a Crowded Market, published in February. Her research has also found that the most at-risk colleges have disproportionate numbers of low-income students and Black students. Those groups of students already have lower retention and graduation rates. A forced interruption runs the risk of them dropping out altogether.

An individual college’s risk of closure depends on a variety of factors, including institution type. Although many public colleges and universities are at risk financially, they are less likely to close than private institutions because they require approval from the state, says Robert Kelchen, a higher education professor at Seton Hall University. Small, private institutions dependent on tuition are the most at risk because not only are they now impacted by enrollment fluctuations, they also are losing money from services such as food and housing.

“Before COVID-19, one of the big warning signs was that [an institution] relied heavily on tuition dollars,” he says. “But now, during the pandemic, whether they’re getting a lot of money from student housing and dining...is probably even more important.”

In addition to reduced revenue from room and board, many public institutions could see declining enrollment from international students, who some campuses have grown to rely on for paying rates up to three times as much as in-state tuition. Baldridge adds that what is more likely to happen at struggling public institutions are drastic budget cuts and program consolidation.

While experts predict that the pandemic will increase the number of campuses facing permanent closure, they stress that it only applies to a fraction of institutions.

“In a typical year, we see about five to 10 private non-profit colleges close and that’s roughly out of 2,000,” Kelchen says.

That number might be higher this year, he says, but “we’re talking about maybe a few dozen colleges closing in the worst case scenario.”

The College Stress Test, which was based on data up to 2016, suggested that as many as 10% of colleges nationwide were at severe risk of closing.

“But COVID and all of the challenges it has produced has undoubtedly upped the ante,” she says. “Could it be as high as 20%? Maybe. The next couple of months will tell us a lot about student behavior, what choices families are willing to make, and what the disease itself is going to do.”

Here’s how to assess your college’s financials.

Ask questions

Baldridge says that most institutions have helpful financial and enrollment data on their websites. If not, you should call the admissions office and request it, she says. She suggests looking at information such as the last three to five years of first-year enrollment data.

"If those numbers are going down, that’s a risk factor,” she says.

Kelchen advises families to ask about whether or not an institution has the financial reserves to keep operating for two to four years and where they would make cuts should it be necessary. He adds that if a student is attending an institution because of a specific program, they should ask about the future of the program and how many students graduate from it each year.

“If it’s a very small program, even if the college doesn’t close, they may look at closing that program,” Kelchen says.

Baker also recommends talking to other students.

“A lot of times student tour guides will give it to you straight up if you ask the right questions,” she says. “Be like, ‘Hey, are you worried about the financial future of this institution? Give it to me straight.' Hopefully you’ll get an honest answer.”

Use online tools to get a snapshot of your college’s financial health

Nick Ducoff, co-founder and CEO of financial aid startup Edmit, suggests using multiple tools to assess if an institution is at risk.

“I highly recommend people to build spreadsheets and triangulate across those,” he says. If multiple tools indicate a college might be in trouble, then “where there’s smoke, there’s probably fire.”

One of those tools is Edmit’s College Financial Health Center, which analyzes how much in assets an institution has, what its expenses are, what its revenues are and the growth of its endowment, if it had one.

“We essentially calculated when an institution would run out of money if its expenses exceeded its income,” Ducoff says.

He also points to the Financial Responsibility Composite Score from the U.S. Department of Education as another resource. In addition, the Hechinger Report, a news publication that covers education, has created a Financial Fitness Tracker that examined key metrics including enrollment, tuition revenue, public funding and endowment health. The authors found that more than 500 institutions show warning signs of closure in two or more metrics. Some states are at greater risk — Ohio and Illinois together have more than 10% of all the institutions potentially facing trouble.

Look at an institution in context of what's happening now

Baldridge advises assessing an institution’s financial risk in the context of the pandemic.

“Anything that a school is doing right now that seems to be directly in response to COVID should be assumed to be just that,...as opposed to a sign of long-term financial unsustainability,” she says. “Most schools that are at risk had financial problems before COVID reared its head.”

Even well-resourced institutions like Northwestern and Harvard have announced measures such as furloughs, layoffs, and salary freezes since March, according to Ducoff.

“Nobody wants to see their employees go or have their salaries and benefits reduced,” he says. “But it’s actually a sign that those institutions are planning and making difficult decisions in order to sustain their operations.”

He adds that predicting which colleges are going to close is difficult.

“But it’s relatively easy to know which colleges are likely to be having financial difficulties,” Ducoff says. “Ultimately, it’s going to be the college’s leadership that is going to dictate their ability to navigate through those choppy waters.”


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